P2PIncome | Top Platforms For Development Loans
When we say "development in finance'' what we are really referring to is large scale real estate projects. Development projects are usually designated for residential areas but often planned for commercial purposes. These projects can include, but are not limited to: schools, hospitals, apartment buildings, shopping malls and so on. Any large scale real estate project that requires mass construction of buildings and societal infrastructure requires a Development Loan.
There are always major development projects happening. Every city, town and even village requires development finance in order to build infrastructure within their society. Development finance is the raising of capital to build said buildings. There is almost always a loan involved, in the form of what we know as a Development Loan and the duration generally takes 6 - 18 months. The loan is acquired for the purposes of purchasing the actual land or real estate, acquiring materials for construction, and the cost of labor and construction. Along the way, as it is with any real estate project, other miscellaneous costs associated with the project will also arise.
The process can get messy, to say the least.
The process can be broken down in two parts:
- The first part is the acquisition of the desired property or the piece of land.
- The second part consists of paying for the works related to the project, such as the purchase of construction materials and labor.
The lender has a representative present at the construction site, also known as the independent monitoring surveyor (IMS) who regularly checks the project and ensures that everything is on time and on budget.
Not decided on whether or not peer-to-peer property lending is for you? Then, take a glance at our guide on peer-to-peer lending and real estate investing.
EstateGuru
EstateGuru stands at the top of peer-to-peer real estate crowdfunding. EstateGuru was founded in 2014, in Estonia.
Initially, they dominated the real estate market in Eastern Europe and have since expanded their service into western parts of Europe, predominantly, Spain and Norway. EstateGuru is very well-known for the track record. Their team has managed to keep their investors capital 100% safe. Every fund recovery has been successfully executed. Even though EstateGuru is already a seasoned player in the peer-to-peer lending space, they have maintained dedication and commitment to quality work. Minimum investments on EstateGuru start at 50 EUR and the expected yearly return per project ranges anywhere from 8% to 12%.
EstateGuru primarily offers loans in the Baltic region of Europe. All loans are real estate based but users can invest in a few different types:
- Hotels
- Apartments
- Condominiums
- Houses
- Malls
- Offices
- Development
Different real estate options will yield different investment outcomes. Shorter loan contracts will result in investments compounding more often, whereas, long term contracts could prove to be reliable, profitable and safe. It's all relative to the kind of investment strategy you would like to take for yourself. There is certainly a high degree of diversification that can be achieved on EstateGuru's marketplace.
Different projects are also committed to different payment cycles. Long term projects such as development projects will pay out less often but in higher amounts. Whereas, funding a rental apartment will yield in smaller payments more frequently. EstateGuru has an auto-investing feature that can be unlocked after investing 250 EUR. They also have a secondary market which is highly active. There are no fees on EstateGuru apart from on the secondary market where there is a 2% transaction fee.
Reinvest24
Reinvest24 is an Estonian peer-to-peer lending platform that was founded in 2019. They offer real estate investment equity for loan contracts. Lenders invest capital and in exchange they hold the equity of the property. Whenever there is a rental check, investors as holders of equity receive a percentage of that check. Despite Reinvest24's late entry to the game, they have been able to remain profitable and mitigate all losses for their investors.
Reinvest24 is still finding it's place in the industry and with investors. Their marketplace does not offer a wide variety of projects and there is a noticeable degree of cash drag. That being said, investing on Reinvest24 has been proven to be a good decision. Investors on Reinvest24 have historically earned high yields with little to no risk. All the platforms that are offered are hand picked by Reinvest24's team based on their ability to earn attractive profits. There are two forms of earnings in Reinvest's model. One of them is capital gains and the other is rental equity. The rental equity comes in regularly, capital gains will only be realized at the end of the contract or if the real estate is sold and a profit is made.
Reinvest24 has a high minimum entry, investments begin at 100 EUR. Reinvest24 does not provide investors with an auto-investing tool. It is of their belief that investors should be aware, mindful and educated on their investment portfolios. Reinvest24 has a secondary market.
PeerBerry
PeerBerry, founded in 2018, is a Latvian peer-to-peer lending platform. PeerBerry is also known as one of the fastest growing peer-to-peer lending platforms in the space. They work with loan originator aggregators and host several loan originators in their marketplace. Peerberry offers many great features for their investors which have been in large part responsible for PeerBerry's success. To invest on PeerBerry there is a 10 EUR minimum investment and yearly returns range from 9 - 12 percent.
PeerBerry mainly deals with consumer loans but have expanded their marketplace to offer a wide variety of loans. All loans are backed by a dual buyback protocol that keeps investors funds safe. This protocol can be split into two parts. First, the Buyback Guarantee — if any loan defaults for a period longer than 30 days, then the loan originator purchases the loan back from the retail investor. In the circumstance that the loan originator himself becomes unable to service the loan contracts from his side, then all the loan originators on PeerBerry step into assist the following loan originator.
PeerBerry offers a very easy to use website, with a well-functioning auto-investing tool. But they have yet to open a secondary market on their platform. PeerBerry's borrower/lender ecosystem is quite interesting in comparison to the rest of the market. Peerberry does not offer complete loan contracts to their investors. The majority, let's say 70%, which is an estimate, is funded by the loan originator issuing the loan. Lenders only have the option to acquire 30% of the total loan pool. Which means the majority of the loan is serviced and managed by the loan originator, as the investors are only taking a cut.
This does not change the profitability for the investors, rather it provides a great degree of security to the investors because they know the platform they are working with have their best interests in play.
Development Loans and Mortgage Lending
Development Loans are giant scale real estate projects either for residential purposes like condominiums and schools or commercial, like malls and theme parks. Projects on this scale are not funded in one go, rather, they are built in installments. The first stage is done, then there is a funding stage for the second stage of the construction. Sometimes, buildings require several stages of investments and building until they are completed.
Lending out capital in the form of property loans or mortgage lending is generally considered low risk. The reason being is these loans are backed by mortgages that can be sold, effectively protecting your principal investment. All platforms listed on this page are platforms that provide 1st or 2nd rank mortgages with LTV rates of 60% and above.
Mortgage lending is one of the oldest lending practices in the world. Prior to the loan originators that we see in consumer based peer-to-peer lending markets, there were only mortgage loan originators. They have more or less the same role, as they issue loans to borrowers and verify that they the reach the eligibility to request a loan. Mortgage lending is considered a safer investment because there is a real protection against a defaulted borrower. It is because of these reasons that peer-to-peer mortgage lending platforms have been able to find real success. You can read more about mortgage lending on our guide to understanding peer-to-peer mortgage lending.
Market Type
Mortgage Loans
Average Returns
8 - 13%
Minimum Investment
EUR 50
Signup Bonus
0.5%
Registered users
150,000
Total funds invested
EUR 700 Million
Default rate
6%
Regulating entity
Bank of Lithuania
Buyback guarantee
Secondary market
Payment methods
Bank Transfer, SEPA, Credit Card, TransferWise
Withdrawal methods
Bank Transfer, SEPA, Credit Card, TransferWise
EstateGuru is a highly recognized and successful P2P Lending company. What makes EstateGuru as P2P Lender so profitable and secure? Explore the breakdown with P2PIncome's thorough analysis of EstateGuru's strengths and weaknesses.
Market Type
Mortgage Loans
Average Returns
12 - 17%
Minimum Investment
EUR 100
Signup Bonus
EUR 10
Registered users
25,000
Total funds invested
EUR 40 Million
Default rate
0%
Regulating entity
Self-Regulated/EU Compliant
Buyback guarantee
Secondary market
Payment methods
Bank Transfer, Bank Card, TransferWise
Withdrawal methods
Bank Transfer, Bank Card, TransferWise
Reinvest24 is an equity backed real estate rental P2P lender. Though they are a much smaller P2P lending platform in comparison to the top P2P lenders. They deserve a high place on the list because of their attention to detail and successful execution of business goals.
Market Type
Consumer Loans
Average Returns
9 - 12%
Minimum Investment
EUR 10
Signup Bonus
0.5%
Registered users
70,000
Total funds invested
EUR 1.8 Billion
Default rate
7%
Regulating entity
Self-Regulated/EU Compliant
Buyback guarantee
Secondary market
Payment methods
Bank Transfer, Bank Card, TransferWise
Withdrawal methods
Bank Transfer, Bank Card, TransferWise
PeerBerry is an excellent P2P platform to its 100 percent successful fund recovery track record. They offer slightly below market interest rates in exchange for a guarantee users will never lose their funds.
Verdict
Development projects are not easy tasks to execute. Larger real estate projects have a higher chance of messing up. It's important that when you choose which platform you would like to use you choose the one with the best track record. Managing millions of Euros in one loan contract with hundreds if not thousands of investors must only be done with those who have the experience and competence to do it well.
While there are many great platforms who can undertake these projects, we find EstateGuru does an exceptional job. Their track record in regard to contracts completed, fund recoveries and millions processed, puts EstateGuru as an ideal candidate for pursuing Development Loans. EstateGuru's commitment to investor protection and success rate of fund recoveries are positive signs worth following.